All Spotsylvania Residents Affected by Retiree Healthcare Benefits Debate
It would be easy to dismiss the current deliberations over County retiree health benefits as affecting only County employees. It would also be easy to express support for what County retirees feel they were promised, since it allows for the goodwill sentiment of providing a benefit without having to consider the consequence of having to raise taxes to pay for it. According to County staff, the promise of healthcare into retirement was vague and did not specify what type of coverage would be provided. It is also true that those Supervisors that made such a political declaration in 1987, did not follow through with funding their promise. This is where we find ourselves in 2018.
This issue affects all County residents due to the enormous cost, that past leaders likely never imagined could balloon to $9 million per year, is now coming due. To put that in perspective, in 1987, according to the U.S. Census Bureau, Spotsy had only 45,000 residents, compared to 133,000 today. Spotsy currently employs 1,036 full time employees for a population of 133,000. This provides a ratio of 128 citizens per employee. Under this admittedly crude comparison, in 1987 only 351 County employees would have existed, and such a promise would thus seem less of a liability. As Spotsylvania grows, the need for more employees will increase as recent years have shown. Between FY2017 and FY2019, the County added 78 new full-time employees. If the $9 million cost only accounts for current employees, we should expect that cost to increase in the future.
Certainly, the current Medicare eligible retirees that will be immediately affected are concerned about changes to this healthcare plan, as all County employees would be that seek to take advantage of this benefit when they retire. However, we cannot casually dismiss that if nothing is changed by FY2023, Spotsylvania will need to set aside over $9 million in the budget, that currently supervisors have demonstrated difficulties finding the resources to fund even core government services. Currently, for each penny increase to the real estate tax rate $1.3 million is collected, which would require close to a 7 penny increase to the real estate rate just to fund this liability.
The current Board is faced with a decision, garnering little attention in the broader community, that has the potential to have major future impact on the County. It will require great care in ensuring that current retirees are not dismissed without providing an equitable alternative. Current and future County employees have a vested interest in this system and if Spotsylvania gets the reputation as selling out its employees it will make it harder to attract quality ones in the future. The decision also needs to be realistic and financially sustainable. If not, it will require future adjustments, and increase the likelihood that Spotsylvania loses credibility with its workforce.
Here are some facts:
- Spotsy currently has 110 Medicare-eligible (65 or older) retirees who will be immediately affected by this change.
- Overall, Spotsy has 185 retirees and is projected to have 263 by 2023.
- If the County alters the retiree healthcare benefit it could save the County $3 million (per year) if current retirees are grandfathered (185). It could save $3.9 million (per year) if only Medicare eligible retirees are grandfathered (110); it could save $5.9 million (per year) if no retirees were grandfathered.
Options being discussed:
It is true that some retirees may not be better off under this new benefit arrangement. But independent insurance consultant Lee Deskin stated that of the roughly 40 Medicare-eligible retirees he worked with only 2 would be negatively affected by the new plan. To address this, on August 14, Supervisor Ross asked whether some retirees could receive extra reimbursements to cover the additional costs so that no retiree is adversely affected. Additionally, Supervisor Trampe asked whether an insurance consultant could be employed to assist the retirees as they transition to this new option, since most retirees appear to financially benefit from the new plan but find the new process confusing and are averse to any change.
Supervisor Marshall has advocated for nothing to change for current retirees; active county employees would have a choice of the reimbursement option or keep the current one. Lastly, all new employees would need to take the reimbursement option. County staff is working to get cost estimates for this scenario. Supervisor Yakabouski has stated he supports a grandfathering option for all retirees. Supervisor Skinner has expressed support for grandfathering retirees but has also said that grandfathering everyone would be unrealistic. Ultimately, Mr. Skinner stated that the Board needs to minimize the risk of switching to any new option.
If this plan over time begins to negatively impact retirees, it could be altered. Similarly, if nothing is done, years from now future supervisors could be required to take more drastic measures to make this system solvent than what currently faces retirees. The lingering question is does the current Board of Supervisors wish to solve this issue in a fair and financially sustainable manner for the foreseeable future or pass the buck to a future Board?
County Staff will report back to the Board of Supervisors with additional information at their September 11th meeting. However, based on Board discussions on August 14, a decision is not expected until their September 25 meeting.